Key Takeaways

  • A new report from Mitek and Datos Insights finds that synthetic identity fraud—where criminals combine real and fabricated data to create fake identities—is becoming aprimary driver of financial crime。
  • The research shows that unsecured credit losses in the U.S. related to synthetic identity fraud are projected to exceed $3.1 billion in 2026, up from $1.8 billion in 2020. The report describes this trend as a "strategic threat to financial institutions." Losses are primarily driven by application fraud—where criminals use synthetic identities to apply for credit cards, personal loans, and other unsecured credit products.
  • "AI-driven tactics, organized criminal operations, and scalable identity manipulation are changing the economics of fraud," said Garrett Gafke, Chief Operating Officer of anti-fraud company Mitek, in a press release on Wednesday.

Deep Insights

The research shows that synthetic identity fraud is growing at approximately 16% annually, driven by the low cost of personal data and the industrialization of fraud operations. The report notes that application fraud is the primary channel through which synthetic identities generate losses—these identities are used to enter the financial system through credit cards, personal loans, and deposit accounts.

Among surveyed financial industry anti-fraud leaders, more than 80% view synthetic identity fraud as a high or medium risk in the application process.

Unlike traditional identity theft, synthetic identity fraud involves creating entirely new identities using a combination of real and fabricated information. These identities are often "cultivated" over time, gradually building credit histories before being used in fraudulent schemes, allowing criminals to appear legitimate to financial institutions during the account opening and creation phase.

The research points out that generative AI is amplifying this threat—it enables fraudsters to generate statistically plausible identity combinations and mass-produce increasingly realistic forged documents, making it harder for traditional verification systems to detect synthetic identities. Among surveyed financial institutions, 40% reported observing an increase in AI-related attack rates.

This trend is forcing financial institutions to rethink how they verify identity at onboarding. "Institutions that invest early in modern verification, behavioral analytics, and lifecycle monitoring capabilities will be better positioned to stop fraud before it spreads across the broader financial ecosystem," said Trace Fooshée, strategic advisor at Datos, a research and consulting firm focused on banking, insurance, and securities industries. He made these remarks in a press release on Wednesday.